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In its biggest deal for almost 20 years, Woolworths yesterday made a $1 billion bid for liquor and gaming group, Australian Leisure & Hospitality, in what could be chief executive Roger Corbett's swan song.

Woolworths and hotel king Bruce Mathieson have offered $2.75 a share for ALH - well below Wednesday's close of $3.22 - valuing the company at $968 million.

The acquisition would deliver Woolworths a greater share of Australia's $11 billion packaged liquor business, increase its buying power with wine producers, and give it access to about 640,000 square metres of prime urban shopping centre land across Australia, a commodity in short supply.

The deal would also strengthen Woolworths's position against Coles Myer at a time when Coles is delivering superior sales growth.

If Mr Corbett can pull off the deal it will cap his five-year reign at the supermarket Goliath, during which he has pushed aggressively into petrol and liquor retailing and slashed the company's cost base.

If he pays too much or if the joint venture with Mr Mathieson proves problematic, chances are Mr Corbett will not be around to carry the can.

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In April last year succession plans at Woolworths were in disarray following the resignation of Bill Wavish, head of its supermarket division and most likely to have succeeded Mr Corbett.

Over a year later, it is thought Mr Corbett has finally chosen an internal successor and will announce the appointment and his retirement later this year.

Woolworths's share price rose 5c to $11.55, with shareholders giving an initial thumbs-up to the deal, despite the lack of detail about funding or how the partners will split the $1 billion cost.

The bid comes with numerous conditions including minimum 50.1 per cent acceptance.

What is clear is Woolworths will manage ALH's bottle shops while Mr Mathieson will manage the pubs, in an arrangement similar to MGW Hotels, another joint venture between the two. MGW has paid an estimated $350 million for more than 30 pubs and 55 bottle shops in Queensland since 2001.

"We wouldn't have done it without a partnership with Bruce Mathieson," said Mr Corbett. "I don't believe anyone else could do it without a similar capacity to manage hotels," he said, adding he did not expect any rival bids to emerge.

ALH investors, however, said the $2.75 bid left plenty of room for a higher offer from the likes of German discount retailer Aldi, Coles Myer or Queensland gaming group UNiTAB.

The Woolworths-Mathieson joint venture vehicle, Bruandwo, already owns 15.8 per cent of ALH stock after it bought 10 per cent of the pubs and pokies concern last week.

Shares in ALH fell 20c to $3.02, which is a 10 per cent premium to the bid.

Argo Investments' Rob Patterson, who owns shares in both companies, echoed comments by other ALH shareholders.

"It looks like just an opening gambit ... I don't think it will be enough," he said.

ALH said the offer was "highly conditional" and pointed out that ALH shares had traded at $3.14 immediately prior to Wednesday's announcement.

"At this stage ALH has not received Bruandwo's offer or bidder's statement and ALH's directors are not yet in a position to make a formal recommendation to shareholders," the company said, advising shareholder to take "no action".

It is understood ALH and its adviser, Goldman Sachs JBWere, will solicit rival bidders should the bid turn hostile and have already drawn up a list of alternative suitors.

Mr Mathieson would not discuss the deal's structure but described the bid as "extremely fair".

"What have they [ALH shares] been trading at for the last six months, $2.30?" he said.

Foster's, which spun off ALH last November, retains a 10 per cent stake but has made no decision about its investment. Brokers have suggested Foster's will use its stake as leverage with Woolworths, one of its largest customers.